Copyright 2001 Ernest R. Cadotte The following slides are for the introduction to the Marketplace game.
Copyright 2001 Ernest R. Cadotte Experiencing the Marketplace
Copyright 2001 Ernest R. Cadotte The Marketplace Is a Fun Way to Learn About Marketing. It is a marketing game. It is learning by doing. It brings to life marketing concepts, principles, and ways of thinking. It energizes the competitive spirit.
Copyright 2001 Ernest R. Cadotte It Is Realistic! You do what your real-life counterparts do –Design brands –Design ad copy –Schedule media –Set selling prices –Hire and train sales people –Worry about profits
Copyright 2001 Ernest R. Cadotte It Is Organized! The game scenario follows the logical process of starting up a new product line. You are guided through the decision-making process. Detailed help files are available at the touch of a button.
Copyright 2001 Ernest R. Cadotte On the left is the step-by-step process that walks you through the information and decisions. The software controls your progression to reduce your uncertainty (and your need to contact the instructor) and to help you see the logic of the marketing process. The Marketplace software is all set up to print the results for each quarter’s play, starting with the Q2 test market. –Name, ID, balanced scorecard, profit statement, market share, customer satisfaction ratings
Copyright 2001 Ernest R. Cadotte For illustration purposes, suppose you start up a company named Apollo Computers
Copyright 2001 Ernest R. Cadotte Here is the game scenario You work for a large international electronics firm. Corporate Headquarters wants to enter the personal computer business.
Copyright 2001 Ernest R. Cadotte Game Scenario You have been selected to head up the new marketing division to sell computers into Asia, United States, Canada, and Western Europe. Three other international firms are entering the market at the same time.
Copyright 2001 Ernest R. Cadotte There are three market segments that have different price and performance requirements. Price Performance Work Horse Traveler Mercedes
Copyright 2001 Ernest R. Cadotte Each market segment has its own set of needs
Copyright 2001 Ernest R. Cadotte You must decide which segment you want to target initially. As the exercise progresses, you are asked to select a second segment. For example, the Traveler segment might be selected.
Copyright 2001 Ernest R. Cadotte Once you select a segment, you must design a brand to meet the needs of the segment. For example, portability is important to the Traveler segment. What features would increase the portability of a PC?
Copyright 2001 Ernest R. Cadotte You must design ads which appeal to the target segment. You select the benefits to mention in the ad and indicate their order of priority. you decide which brand will be featured in the ad.
Copyright 2001 Ernest R. Cadotte You set the selling price, decide if you want to use a rebate, and signal to the sales staff which brand has the highest priority.
Copyright 2001 Ernest R. Cadotte As the quarters progress, you decide how you want to expand your international market coverage.
Copyright 2001 Ernest R. Cadotte When your decisions are ready to be processed through the Marketplace simulator, a quality check is made to make sure there were no entry errors and nothing important was forgotten.
Copyright 2001 Ernest R. Cadotte Immediately after processing (which takes 2 minutes), you find out how profitable the division was in the quarter that just ended.
Copyright 2001 Ernest R. Cadotte You can see your market share by segment and for the whole market. Your company is Apollo, black.
Copyright 2001 Ernest R. Cadotte You are given market research that tells you how satisfied your target segment is with your brand design and those of the competition. (100 is total satisfaction.) Your brand
Copyright 2001 Ernest R. Cadotte If a brand is not doing well, you can study other brands and redesign your brand. Your brand Better brand
Copyright 2001 Ernest R. Cadotte You are also given a profit analysis of each brand so that you can adjust your brand strategy.
Copyright 2001 Ernest R. Cadotte Grading: The Balanced Scorecard Your final grade will be the average of your firm’s profitability, market share, and customer satisfaction –Operating profit/20,000,000 –Sum of market shares in 2 target segments –Average customer satisfaction with brand and advertising designs in 2 target segments (scored 0 to 100) –Quarter 6 results will be used to compute grade.
Copyright 2001 Ernest R. Cadotte Each quarter, you will be presented with your balanced scorecard. Your goal is to achieve a 90 or better by Quarter 6 in Total Business Performance.
Copyright 2001 Ernest R. Cadotte CD Installation 5 minutes to set up Home computer –hard drive installation –always need CD Computer lab –mobile installation –select high density disk option (Zip disk, do not use the floppy disk installation) –purchase Zip disk – files saved on Zip disk –always need CD and Zip disk
Copyright 2001 Ernest R. Cadotte How is the marketing game conducted? Teams are placed in a game scenario that has them starting up and running a new marketing division. The opposition is played out by computer- generated competitors.
Copyright 2001 Ernest R. Cadotte Business Team Market Opponent Opponent Opponent Objective is to profitably capture a dominant market position
Copyright 2001 Ernest R. Cadotte How Conducted? At the outset of each quarter, you will receive information on the current situation. Current situation is evaluated, strategy formulated, and tactics set in placed. Tactical decisions are fed into the marketplace simulator, along with decisions of opponents. Results of decisions are fed back to you.
Copyright 2001 Ernest R. Cadotte Chronology of Events Q1, Organize the Division Name the company, Analyze the market survey, Choose the initial target segment, Schedule the opening of one sales office.
Copyright 2001 Ernest R. Cadotte Q2, Test Market Design a brand for the target segment, Hire a few sales people, Price the brand, and Design a small advertising campaign.
Copyright 2001 Ernest R. Cadotte Q3, Skillful Adjustment Review the market data from the test market, Adjust the division’s strategy and tactics (brand design, pricing, advertising, sales force) as needed.
Copyright 2001 Ernest R. Cadotte Q4, Expand the Market Offering Select a second segment to target and design a marketing program to go after that segment. –design a new brand, –price the brand, –add sales people, –design a new ad, –run the ad in the local media. – schedule the opening of a new sales office.
Copyright 2001 Ernest R. Cadotte Q5, Enhance the Market Offering Introduce new brands with new R&D features, Continue with market expansion by adding advertising, sales people and new offices.
Copyright 2001 Ernest R. Cadotte Q6, Refine the Marketing Strategy Study the market data to determine how to better meet customer needs and surpass the competition through brand design, pricing, advertising, and distribution.
Copyright 2001 Ernest R. Cadotte Q7, Present Report to Corporate Headquarters Strategic thinking and tactical execution Market performance (Balanced Scorecard) –profitability –customer satisfaction –market share in targeted markets How well is the division prepared for the future
Copyright 2001 Ernest R. Cadotte The Marketplace Is a Fun Way to Learn About Marketing!
Copyright 2001 Ernest R. Cadotte The following slides are for Quarter1
Copyright 2001 Ernest R. Cadotte Q1, Organize the Division Name the company, Analyze the market survey, Choose the initial target segment, Schedule the opening of one sales office.
Copyright 2001 Ernest R. Cadotte Learning Points for Quarter 1 Image creation (company name) Market opportunity analysis Segmentation and target marketing
Copyright 2001 Ernest R. Cadotte The following slides are for Quarter 2
Copyright 2001 Ernest R. Cadotte Execute a coherent strategy Learn to walk before you run Q2, Test Market: The Goal is to Maximize Learning and Not Profits.
Copyright 2001 Ernest R. Cadotte Q2, Test market Design a brand for the target segment, Hire a few sales people, Price the brand, and Design a small advertising campaign.
Copyright 2001 Ernest R. Cadotte How do you decide what to design into a brand?
Copyright 2001 Ernest R. Cadotte The most important rule in brand design: Customers Buy Benefits, Not Features
Copyright 2001 Ernest R. Cadotte Once you select a segment, you must design a brand to meet the needs of the segment. “Using the computer on the road” is important to the Traveler segment. What features would provide this benefit?
Copyright 2001 Ernest R. Cadotte How far do you go in giving the customers what they say they want? Is more speed, software applications, memory, keys on the keyboard, etc. always valued? Could “more of some feature” even make a customer unhappy? Let’s take a look at this question in another industry – candy bars.
Copyright 2001 Ernest R. Cadotte What is the elasticity of the peanut? Searching for the Market’s Response Function
Copyright 2001 Ernest R. Cadotte Suppose you could design the ideal candy bar. How many peanuts would you put in the candy bar to make you the happiest? A few? A bunch? A whole lot?
Copyright 2001 Ernest R. Cadotte Which candy bar has the most peanuts? MilkyWay Snickers Baby Ruth PayDay
Copyright 2001 Ernest R. Cadotte Which candy bar do you like the most? MilkyWay Snickers Baby Ruth PayDay
Copyright 2001 Ernest R. Cadotte What does your response function look like for peanuts? Is more always better? Would your happiness increase with every new peanut we added to the candy bar? Is there a limit?
Copyright 2001 Ernest R. Cadotte What would be your response function for the following? Chocolate Caramel Coconut Rice Peanut butter
Copyright 2001 Ernest R. Cadotte Here are a number of response functions. Which one applies to peanuts, chocolate, coconut, etc? Hot Cold LessMore Hot Cold LessMore More is always better More is good to a point and then ceases to add excitement
Copyright 2001 Ernest R. Cadotte Hot Cold LessMore A little is just right, more only takes away value Hot Cold LessMore More adds value to a point & then takes away value
Copyright 2001 Ernest R. Cadotte Hot Cold LessMore Little interest until threshold is crossed Hot Cold LessMore Any amount is bad
Copyright 2001 Ernest R. Cadotte Hot Cold LessMore No reaction/indifference to having the feature
Copyright 2001 Ernest R. Cadotte Take any PC segment, how excited will it become if you provide? More memory More speed More functions on the keyboard More software More …. Just like the candy bar ingredients, you must discover the response function for each PC component.
Copyright 2001 Ernest R. Cadotte How to Set Price? Costs (production, marketing, overhead) Profit goals What the market will bear Competition
Copyright 2001 Ernest R. Cadotte In the beginning, you will not be able to price above your costs. There are many startup costs which will exceed your revenues. Your production volumes will be very low, resulting in high per unit costs
Copyright 2001 Ernest R. Cadotte No early profits Money 0 Time costs to setup & grow the business +
Copyright 2001 Ernest R. Cadotte Revenues will fall below costs at the outset of a new business Money 0 Time costs to setup & grow the business Revenue +
Copyright 2001 Ernest R. Cadotte Profits will come later Profits come later. You are here. Profit Profits 0 Time costs to setup & grow the business Revenue + -
Copyright 2001 Ernest R. Cadotte Your goal is to speed up the adoption rate. Demand Time introduction growth maturity decline You are here, high costs-low demand
Copyright 2001 Ernest R. Cadotte What will the market bear? You must discover the market response function regarding price.
Copyright 2001 Ernest R. Cadotte What is the market’s price response function? Your Demand Your Price Elastic (demand drops fast with increasing prices) Inelastic (price is not a big factor.)
Copyright 2001 Ernest R. Cadotte Or, maybe it looks like this. Your Demand Your Price Demand drops slowly with small price increases and then drops dramatically with larger price increases.
Copyright 2001 Ernest R. Cadotte How will the market respond to competitor prices? Your Demand Competitor’s Price Low competitor prices will kill your demand
Copyright 2001 Ernest R. Cadotte How to create ads? Low price Easy to use More productive Fast Office applications Picture office workers Most important Order of priority implies importance of message to customer Order of priority tells the ad agency what to stress in the ad Your Ad Least important
Copyright 2001 Ernest R. Cadotte How much to say in an ad? (number of benefits) Hot Cold LessMore More is good to a point and then ceases to add excitement Hot Cold LessMore More adds value to a point & then takes away value Which response function is at work? or
Copyright 2001 Ernest R. Cadotte How often do you advertise? Your Demand Number of ads Diminishing returns Too little
Copyright 2001 Ernest R. Cadotte But it also depends on what your competitors do Your Demand Competitor’s Advertising Strong competitor advertising will steal away your customers
Copyright 2001 Ernest R. Cadotte How many sales people? Your Demand Number of sales people Too many Diminishing returns Too few
Copyright 2001 Ernest R. Cadotte Your Demand Number of sales people Shift the response function upwards with better brands, prices, advertising, sales force placement The response function is dynamic!
Copyright 2001 Ernest R. Cadotte Q2 results will be available at the start of Q3.
Copyright 2001 Ernest R. Cadotte What to turn in after Q2 decisions have been run through the marketplace simulator? Q2 results are available at the start of Q3. The Marketplace software is all set up to print the results for each quarter’s play, starting with the results of the Q2 test market. –Name, balanced scorecard, profit statement, market share, customer satisfaction ratings Print options –Paper copy –Electronic copy
Copyright 2001 Ernest R. Cadotte Paper Copy of Results Follow the normal decision sequence, or Click on button labeled, “Print everything for instructor” from the Headquarters file folder. Click on “Print” button.
Copyright 2001 Ernest R. Cadotte Electronic Copy of Results Your instructor might want an electronic copy in place of, or in addition to, the paper copy. Click on the button, “Copy Performance Data to Floppy for Instructor”.
Copyright 2001 Ernest R. Cadotte Learning Points for Quarter 2 Execution of a coherent strategy Learning to walk before you run
Copyright 2001 Ernest R. Cadotte Learning Points for Quarter 2 Marketing strategy - coordinating a host of tactics Brand design – linking product features to customer benefits Pricing - balancing costs, profit, what the market will bear, and competition Advertising – deciding what to say, how to say it and how frequently to say it Sales force – hiring and targeting the sales staff Testing the market - discovering the market’s many response functions
Copyright 2001 Ernest R. Cadotte The following slides are for Quarter 3.
Copyright 2001 Ernest R. Cadotte Q3, Skillful Adjustment Review the market data from the test market, Adjust the division’s strategy and tactics (brand design, pricing, advertising, sales force) as needed.
Copyright 2001 Ernest R. Cadotte Q3, Evaluate Performance Check customer reaction to brands, prices, and advertising Check financial performance Check out competition –strategic direction –tactics –market’s response to their prices, brands, ads
Copyright 2001 Ernest R. Cadotte Q3, Skillfully Adjust Strategy As needed, adjust –strategy –brand designs and prices –advertising –sales office locations –sales force management Feed decisions into Marketplace simulator
Copyright 2001 Ernest R. Cadotte Measures of Customer Satisfaction Brand judgment (0 to 100) Price judgment (0 to 100) Ad judgment (0 to 100) 100 indicates complete satisfaction. 70 would be a good brand and ad rating for the first year. New technology will be available in Quarter 5. The new features will make customers happier and yield higher ratings. Price ratings should be near 100 in all quarters.
Copyright 2001 Ernest R. Cadotte Goal of Monitoring Customer Satisfaction Give the customer what it wants and do so better than the competition.
Copyright 2001 Ernest R. Cadotte Deduce the market’s many response functions Hot Cold LessMore Hot Cold Less More Hot Cold LessMore Hot Cold LessMore Hot Cold LessMore Hot Cold LessMore
Copyright 2001 Ernest R. Cadotte Based upon customer feedback, skillfully adjust marketing tactics Revise brand design or create new one Revise ad copy Adjust prices Hire more sales people or deploy them differently Add or take away elements to find the sweet spot in the customer’s response function.
Copyright 2001 Ernest R. Cadotte Competitor Benchmarks Brand and ad designs Prices and sale priorities Sales staffing Ad placements Demand by brand by segment
Copyright 2001 Ernest R. Cadotte Goals of Competitive Benchmarking Reverse engineer the strategy of each competitor Determine who is a threat and who is not Determine strengths and weakness of competition Emulate good decisions Predict direction of competitive moves Adjust strategy and tactics in reaction to competitor strengths and weaknesses and in anticipation of future moves.
Copyright 2001 Ernest R. Cadotte Grading is Based upon Achievement of Goals! Earn $20,000,000 in profit by Quarter 6, Capture 50% of the market in at least two market segments; and, Achieve 90% customer satisfaction in your brand designs and advertising copy.
Copyright 2001 Ernest R. Cadotte Grading: The Balanced Scorecard Final grade will be the average of your firm’s profitability, market share, and customer satisfaction –Operating profit/20,000,000 –Sum of market shares in 2 target segments –Average customer satisfaction with brand and advertising designs in 2 target segments (scored 0 to 100) –Quarter 6 results will be used to compute grade.
Copyright 2001 Ernest R. Cadotte Why Use a Balanced Scorecard? It is too easy to get caught up in market share. Long-term viability requires that managers also deliver customer satisfaction and profits. The balanced scorecard measures both the long-term and the short-term. The best managers will be good in the 3 areas measured.
Copyright 2001 Ernest R. Cadotte The following slides are for Quarter 4
Copyright 2001 Ernest R. Cadotte Q4, Expand the Market Offering Select a second segment to target and design a marketing program to go after that segment. –design a new brand, –price the brand, –add sales people, –design a new ad, –run the ad in the local media. –schedule the opening of a new sales office.
Copyright 2001 Ernest R. Cadotte Your goal is to speed up the adoption rate. Demand Time introduction growth maturity decline You are here. New segments, brands, advertising, sales staff and sales offices will push you into the growth phase.
Copyright 2001 Ernest R. Cadotte Grow the Market Target a new segment Develop a second marketing strategy targeted at the new segment.
Copyright 2001 Ernest R. Cadotte Financial Performance Now that you have multiple brands, you can evaluate your performance by brand and the division as a whole.
Copyright 2001 Ernest R. Cadotte Goals of Financial Management Discover which brands and markets are making the greatest and weakest contribution to the bottom line. Deploy resources to correct weaknesses and take advantage of strong performers.
Copyright 2001 Ernest R. Cadotte Learning Points for Quarter 4 Differentiating the marketing strategy – multiple strategies aimed at multiple segments The management of strategy –learning from your customers –learning from your competition –learning from your financial information –skillfully adjusting your strategy and tactics
Copyright 2001 Ernest R. Cadotte The following slides are for Quarter 5.
Copyright 2001 Ernest R. Cadotte Q5, Enhance the Market Offering Introduce new brands with new R&D features, Continue with market expansion by adding advertising, sales people, and new offices.
Copyright 2001 Ernest R. Cadotte What Is New In Quarter 5? Ability to design new brands with new R&D features from engineering
Copyright 2001 Ernest R. Cadotte Corporate Headquarters is expecting great things from you! Demand is up for the entire industry Your firm has established itself as a viable competitor New sales offices would greatly expand distribution, drive up unit volume, and thereby reduce unit costs. New brand features could increase customer satisfaction, and thereby demand.
Skillfully adjust your marketing strategy to expand your position in the market Demand Time introduction growth maturity decline You want to move in this direction.
Copyright 2001 Ernest R. Cadotte Learning Points for Quarter 5 Management of strategy –discover the causes of performance shortfalls –adapt to new opportunities and problems –work on the margin to improve performance where should money be spent next? how can we get more out of our current investments? –manage the future (taking the initiative now by expending resources that will shape the events and opportunities of the future)
Copyright 2001 Ernest R. Cadotte Learning Points for Quarter 5 Management of strategy (continued) –discover and exploit the market’s many response functions –learn from smart competitor decisions –You can not go to Hawaii on market share (at the end of the day, wealth creation is the goal)
Copyright 2001 Ernest R. Cadotte The following slides are for Quarter 6
Copyright 2001 Ernest R. Cadotte Q6, Refine the Marketing Strategy Study the market data to determine how to better meet customer needs and surpass the competition through brand design, pricing, advertising, and distribution.
Copyright 2001 Ernest R. Cadotte Your goal is to manage your division’s total performance The best marketers are good at managing –Financial Performance –Market Performance –Marketing Effectiveness
Copyright 2001 Ernest R. Cadotte Use the Balanced Scorecard Final grade will be the average of your firm’s profitability, market share and customer satisfaction –Operating profit/20,000,000 –Sum of market shares in 2 target segments –Average customer satisfaction with brand and advertising designs in 2 target segments (scored 0 to 100) –Quarter 6 results will be used to compute grade.
Copyright 2001 Ernest R. Cadotte Skillfully adjust the marketing mix to grow your market Demand Time introduction growth maturity decline You want to be here.
Copyright 2001 Ernest R. Cadotte Learning Points for Quarters 6 Management of strategy –discover the causes of performance shortfalls –adapt to new opportunities and problems –work on the margin to improve performance where should money be spent next? how can we get more out of our current investments? –manage the tactical details
Copyright 2001 Ernest R. Cadotte Management of strategy –discover and exploit the market’s many response functions –learn from smart competitor decisions –You can not go to Hawaii on market share (at the end of the day, wealth creation is the goal) Learning Points for Quarters 6
Copyright 2001 Ernest R. Cadotte The Following Slides Are Used for the Final Summary
Copyright 2001 Ernest R. Cadotte Experiencing Marketing the Marketplace
Copyright 2001 Ernest R. Cadotte When we work strictly in our functional areas, we are like a bunch of blind people trying to understand what an elephant is. Please tell me what it is.. It’s a snake. It’s a tree trunk. It’s a sheet of rawhide. It’s a steel tube.
Copyright 2001 Ernest R. Cadotte With business war games, you can crawl all over and under the marketing organization to help you to see and understand the whole thing. It is a marketing organization! Brands Distribution Research Pricing Advertising
Copyright 2001 Ernest R. Cadotte Key Benefits Facilitate learning of important marketing concepts, principles, and ways of thinking. Promote better decision making by helping students see how their marketing decisions are interconnected and need to be managed as a whole.
Copyright 2001 Ernest R. Cadotte Key Benefits Develop marketing planning and execution skills within a rapidly changing environment. Instill a bottom line focus and the simultaneous need to deliver customer value. Crystallize the financial implications of marketing decisions by linking them to bottom-line performance.
Copyright 2001 Ernest R. Cadotte Key Benefits Discover how important it is to use market data and competitive signals to adjust the strategic plan and more tightly focus business tactics. Build marketing confidence through knowledge and experience.
Copyright 2001 Ernest R. Cadotte Course Evaluation Experiencing the Marketplace